San Francisco: Golden Gate and golden-priced hotels

Region’s soaring job market and tech-industry boom fuelling surge in room rates, report says

LOS ANGELES— San Francisco already is one of the priciest U.S. cities for apartment renters and companies seeking office space. Now, the area has a new distinction: it’s the world’s most expensive place for visitors to spend the night.

The average price for a San Francisco hotel room has jumped 88 per cent in the past year to $397 (U.S.) a night, according to an index compiled by Bloomberg of the world’s top 100 financial centres. The city ranks ahead of Geneva, where rooms set travellers back $292 a night, and Milan, at $271. Chicago, with rates at $240, ties Miami as the second-costliest U.S. cities.

The surge in San Francisco room rates was the biggest among the lodging markets tracked by Bloomberg. The rising costs are being driven by the region’s technology-industry boom, a soaring job market and a dearth of hotel construction as developers focus on office and residential buildings — a combination that’s allowing operators to be aggressive with their pricing.

“The influx of tech companies into San Francisco has been tremendous, and with it this new emerging traveller, this millennial traveller, who is looking for downtown experiences,” said Chuck Pacioni, general manager at the San Francisco Marriott Marquis. “Many of them may travel for work to Silicon Valley, but instead of staying at a suburban hotel, they want to stay in the city for the culture and the experiences.”

The high rates visitors are paying for rooms have enticed investors. Loews Corp.’s lodging unit bought the Mandarin Oriental San Francisco Hotel in April, two months after Hilton Worldwide Holdings Inc. bought the city’s Parc 55.

San Francisco is one of 25 lodging mar- kets with a year-over-year increase in room rates, the Bloomberg data show. Chicago had the second-biggest gain, with a 64-per-cent surge, followed by a 47-per-cent jump in Milan and a 33-percent rise in Kuala Lumpur.

Among U.S. cities where hotel costs have fallen, New York had the biggest decrease, with a 13-per-cent decline to an average room rate of $202. In Europe, Paris hotels were among the biggest losers, with a 37-per-cent drop to $146.

Nightly prices in Budapest fell by more than half, the greatest decline worldwide, to $85. Globally, the cheapest market is Hanoi, Vietnam, where rooms average $62 a night.

The Bloomberg gauge measured100 cities based on the average daily cost of hotels, regardless of star ratings, for two adults in a double-occupancy room. Rate calculations were taken in May for two blocks of time — Aug. 1 to Aug. 10 of this year and Feb. 1 to Feb. 10, 2016 — to account for holiday, promotion and convention-related pricing.

In San Francisco, a booming job market has helped boost the city’s population by 5.9 per cent over four years, according to the latest U.S. Census Bureau figures. That compares with a 4.2-per-cent gain statewide.

The city’s workforce growth has led developers to focus on building office projects, said David Loeb, a lodging analyst at Milwaukee-based Robert W. Baird & Co. More than eight million square feet of office space is scheduled for development in the next four years, according to CBRE Group Inc. San Francisco may surpass Manhattan as the priciest U.S. office market by the end of this year, the brokerage said this month.

Residential projects are popular, with San Francisco apartment rents averaging $2,280 in the first quarter, twice the national average, according to research firm Reis Inc. “There’s a ton of office and a ton of residential going up because there’s a lot of job growth,” Loeb said.